1986 (5) TMI 175 - AT - Central Excise

Summary

Issues:
Interpretation of the term "manufacturer" under Section 2(f) of the Central Excises & Salt Act, 1944 in relation to the production of stainless steel utensils by multiple units on behalf of a principal company.

Detailed Analysis:

1. The main issue in this case was the determination of whether the principal company, M/s. Shakti Udyog, could be considered the manufacturer of stainless steel utensils produced by other independent units on their behalf. The appellants argued that merely owning the raw materials and the finished goods did not make them the manufacturers, as the actual manufacturing process was carried out by the independent units. They contended that the Collector had erred in considering the principal company as the manufacturer based on the Supreme Court judgment in the Shree Agency case.

2. The learned Counsel for the appellants emphasized that the key contention revolved around the definition of a manufacturer under the Central Excises & Salt Act, asserting that the independent units were the actual manufacturers of the utensils, even though the raw materials were provided by the principal company. They argued that the ownership of the materials did not equate to being the manufacturer, and the independent units were not solely working for the principal company but also for other clients.

3. The arguments presented by the appellants highlighted the significance of determining the manufacturer of the goods, as it would have implications on the applicability of Notification No. 176/77-C.E. The central issue was whether the principal company could be considered the manufacturer for the purpose of excise duty liability based on the production process carried out by the independent units.

4. On the other hand, the learned SDR vehemently argued against the appellants, relying on the Collector's order and the Shree Agency judgment to assert that the principal company engaged in manufacturing activities through the independent units. The SDR contended that the clearances of the utensils should be accounted for under the principal company's name, citing the Shree Agency case as a precedent for such a determination.

5. The Tribunal examined the facts surrounding the production process and ownership of the utensils, concluding that the independent units were the actual manufacturers of the goods, despite the raw materials being provided by the principal company. The Tribunal emphasized the distinction between ownership and manufacturing, stating that ownership alone does not confer the status of a manufacturer.

6. The Tribunal further clarified that the clearances of the utensils should be attributed to the independent units that manufactured them, rather than being accounted for under the principal company's name. The decision was based on the lack of legal provisions supporting the concept of "clearance on behalf" in excise law, emphasizing that clearance is an independent action performed by the manufacturer.

7. Ultimately, the Tribunal set aside the Collector's order and directed a redetermination of the exemption claimed by the principal company in a manner consistent with the findings that the independent units were the manufacturers of the utensils. The judgment underscored the importance of accurately determining the roles of parties involved in manufacturing processes for excise duty purposes.